Group Learning, Wage Dispersion and Non‐Stationary Offers

28 Pages Posted: 6 Jun 2017

See all articles by Julio J. Rotemberg

Julio J. Rotemberg

Harvard University, Business, Government and the International Economy Unit (deceased); National Bureau of Economic Research (NBER) (deceased)

Date Written: July 2017

Abstract

Can differences in equilibrium beliefs among otherwise identical individuals account for a substantial degree of wage inequality? This paper shows that this is possible if two conditions are met. First, people learn about the distribution of wage offers from the experience of their peers, and second, people believe that wage offers are stationary even though offers that arrive later tend to have higher wages than offers that arrive earlier. Peer groups can then end up with different stable beliefs that lead to intergroup wage differences. The non‐stationarity of offers is rationalized in a model where firms can either advertise their job openings or not, and where advertised ones have more influence on more inexperienced job searchers. A statistic is proposed whose application to existing studies suggests that the non‐stationarity considered here is present in data.

Suggested Citation

Rotemberg, Julio J., Group Learning, Wage Dispersion and Non‐Stationary Offers (July 2017). Economica, Vol. 84, Issue 335, pp. 365-392, 2017. Available at SSRN: https://ssrn.com/abstract=2981365 or http://dx.doi.org/10.1111/ecca.12225

Julio J. Rotemberg (Contact Author)

Harvard University, Business, Government and the International Economy Unit (deceased) ( email )

Cambridge, MA
United States
617-495-1015 (Phone)
617-496-5994 (Fax)

National Bureau of Economic Research (NBER) (deceased)

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